Europe stands on the threshold of a series of dramatic make-or-break decisions this week that will determine whether the eurozone can finally move towards resolving its long-running economic crisis or shift alarmingly towards the abyss of European disintegration.

Tomorrow judges at Germany's constitutional court will decide if a hotly contested permanent rescue fund can be set up to help bail out ailing eurozone countries. A No verdict or even restrictive conditions could cause chaos on the markets and signal the beginning of a possible demise of the euro.

Their ruling will be followed by a general election in the Netherlands. The result could hand power to the Eurosceptic Labour party of Emile Roemer, which is riding on a wave of popular frustration over Europe. Such an outcome could sow disarray within Europe and seriously undermine the EU's strategy for helping ailing eurozone countries.

Tomorrow also sees the formal announcement of the European Commission's plans for a banking union. On Friday eurozone finance ministers will hold a key meeting to discuss the way forward for debt-ridden Spain and Italy. As a commentator for Germany's Der Spiegel magazine put it yesterday: "This is the week that could make or break the common currency."

But the euro agenda does not end there: today the Greek Prime Minister Antonis Samaras meets the European Central Bank chief Mario Draghi to address Athens' demands for a bailout extension.

Their encounter follows a pessimistic assessment yesterday from the so-called "Troika" of inspectors from the International Monetary Fund, European Central Bank and European Commission on Greece's progress towards making the €12bn worth of spending cuts needed to qualify for its next massive tranche of bailout funding.

But the biggest decision of the week will unfold inside a nondescript concrete and glass building in the German city of Karlsruhe, which happens to be the seat of the country's powerful constitutional court. A panel of crimson-robed judges will assemble in the morning to rule whether the backing given by Chancellor Angela Merkel's government last year for a permanent €500bn European bailout fund known as the European Stability Mechanism (ESM) is legal or breaches Germany's constitution.

Reflecting widespread public opposition in Germany to the idea of taxpayers being legally obliged to pump their earnings into a fund designed to permanently bail out its ailing European neighbours, the ESM proposal is being challenged by 3,700 plaintiffs. It is the largest number of opponents to a piece of legislation the constitutional court has ever experienced.

German anger over eurozone funding already reached boiling point last week with the announcement by Mr Draghi detailing the bank's plans to buy up unlimited amounts of eurozone government bonds to help ailing countries overcome high interest rates.

Germany's Bundesbank said the measure was "close to state financing via the printing press". At the weekend Peter Gauweiler, a Eurosceptic politician, issued a direct challenge linking the ECB measure and ratification of the ESM. He insisted in a constitutional court appeal that the judges should not approve the ESM until the ECB had rescinded its bond-buying plan.

The constitutional court's job has been made even harder by widespread claims in the German media that by deciding on such key issues, the court is straying dangerously away from purely legal matters into uncharted and hitherto impermissible "political" decision making.

Ominously the court's ruling was also preceded by dire warnings from the respected international financier, George Soros. He told a group of leading German bankers on Sunday night that it was time for Germany to "lead or leave the eurozone".

A fierce critic of Angela Merkel, Mr Soros said Europe should target 5 per cent growth. He argued that Germany should drop its insistence on austerity and become a more "benevolent leading country" or leave the eurozone. "Either alternative would be better than the present course," he said.

Despite the pessimism, most politicians in Germany remain confident that the constitutional court will rule in favour of the ESM. Dutch Europhiles were also able to breathe at least a sigh of temporary relief yesterday after opinion polls suggested that Holland's pro-EU centre parties were on course for a narrow victory. The ruling Liberal party was shown to be leading the Eurosceptic Labour by one per cent in a survey conducted at the weekend.

Victory for the Dutch Labour party would be particularly galling for Chancellor Merkel's government because it would undermine its commitment to eurozone austerity. If the Dutch polls prove correct, then the election is likely to result in a coalition of Liberals and Labour taking power. Dutch voters have warmed to the EU in recent days with the public welcoming the recent ECB bond-buying decision.

But even if the Karlsruhe court and Holland swing in the euro's favour, a big question mark will still hang over Greece. The country's three ruling coalition partners remain at loggerheads over a critical €12bn saving programme that the government has to implement to qualify for more bailout funding.

The three parties will convene again tomorrow in an attempt to hammer out a decision. But inspectors from the Troika have rated Athens' ability to tackle endemic problems of tax evasion as "uncertain".

The Greek government may yet be able to obtain some unexpected support from Germany – the country many Greeks hold accountable for their current financial misery. Der Spiegel reported at the weekend that Ms Merkel had taken a major policy U-turn and decided it was crucial to ensure that Greece remained in the eurozone at least until after Germany's September 2013 general election.

The 'ESM': what it will do

"ESM" stands for European Stability Mechanism, a body which will manage a permanent European bailout fund of about €500bn. It will also have a say in the fiscal policy of member states, and has been called the European version of the International Monetary Fund. It was devised to replace the European Financial Stability Facility, a temporary fund set up in the early days of the euro crisis. It was due to start in July, but critics in Germany argued it breached the country's constitution.

Critical week crunch time for the euro

Today: After a bruising meeting with inspectors from the European Commission, the European Central Bank and the International Monetary Fund, Greek Prime Minister Antonis Samaras heads to Frankfurt to try to convince ECB President Mario Draghi, right, of his plans to make nearly €12bn in budget cuts to secure the release of €31bn in bailout cash. But he's facing pressure from the inspectors to make deeper cuts to the civil service.

Tomorrow: Crunch day for the eurozone, with Germany's constitutional court due to rule on the legality of the European Stability Mechanism, which some opponents say hands too much control to Brussels. Eyes are also on elections in the Netherlands, seen as a bellwether for opinion in the rest of Europe. There will be jitters if the Eurosceptics perform well. Meanwhile, in Strasbourg, EU Commission President José Manuel Barroso is expected to lay out plans for a banking union for the eurozone.

Friday: After a packed week, finance and economic ministers from eurozone nations will hold an informal meeting in Nicosia, where they are expected to discuss if any more measures need to be put in place to protect Spain and Italy from further turmoil.

Spain is also under pressure to formally ask for rescue funds from Europe this week, which would trigger the European Central Bank's facility for buying the country's bonds in unlimited quantities. The only scheduled announcement from Madrid, however, is a review of the nation's troubled banks.